To what Extent was the Stock Market Crash the Cause of the Great Depression in America

Summary of Evidence

Source 1

This source describes the economic state of the USA prior to World War 1 until the 1930s. The source states the change of the US policy from a policy of isolation to a policy of involvement, with President Wilson taking America into the war. America provided food, arms and munitions to the Allies during the war and this military assistance boosted the trade between America and Europe. When World War 1 ended in 1918 and the Treaty of Versailles was signed in 1919, the USA once again adopted the policy of isolation and Warren Harding took America into a period of prosperity. The source discusses the economic strength of America in the 1920s and the reasons behind the strength, as well as the Stock Market Crash, also known as the Wall Street Crash, in America and the causes of the Great Depression.

During the 1920s in America, the production of consumer goods increased rapidly and more infrastructure was built. The USA was rich in resources and had massive steel, coal and textile industries. Food production also increased rapidly during the 1920s. The US Presidents from 1920 to 1932 were Republicans and the policies of the Republican Party were factors said to have contributed to the economic success of America. Republicans adopted the economic management style of laissez-faire and rarely interfered with business men. Tariffs also protected local business because imported goods were made expensive, and tax was kept as low as possible so people could have money to spend on American businesses. A new industry such as the motor-car industry was booming.

The problems in the US economy are also discussed and some problems are thought to have caused the Great Depression are analysed. The source discusses the negatives impact on the US economy caused by an increase of food production, unemployment and the inequality between genders and race. The causes and effects of the Wall Street Crash on the American economy are also discussed.

Source 2

Bottaro, J. , Visser, P and Worden, N. 2012. In Search of History Grade 11 Learner’s Book. Cape Town: Oxford University Press Southern Africa Ltd. pp. 44-55

This source discusses the economy of America from the 1920s to the 1930s. The source discusses the causes of America’s economic boom during the 1920s and the causes of the economic crisis in late 1920s. The source explains the impact the Stock Market Crash on the US economy and various factors that contributed to the Great Depression.

The capitalist system in the US is analysed, and benefits and downfalls of this economic system in America during the 1920s are identified. New industry and technologies were developed in the 1920s and this, amongst other factors such as policies made by the Republican Party, are listed to have contributed to the economic boom in the US. The weaknesses in the US economy are identified and there underlining problems are identified as factors that caused the Great Depression in America in the 1930s. Inequality amongst races, low wages, discrimination, agricultural problems and unsound business practises are some factors discussed as weaknesses in America that led to the Great Depression. The Wall Street Crash is viewed as a main cause of the Great Depression, as well as a symptom of occurring economic problems in America during the 1920s. The Wall Street Crash is analysed to identify the causes of the Crash and the impacts the Crash had on the US economy.

Source 3

This source discusses the economic state of America during the Roaring Twenties, as well as various factors that had a role in causing the Great Depression such as weak banking systems and unpaid war debts. Yass discusses the booming new industries established in America in the 1920s as well as long-term problems in the economy that were not addressed such as a disparity of wealth. This source discusses the Wall Street crash in America in 1929 as a catalyst of the Great Depression. Factors causing the Wall Street Crash are stated. The responses to economic crises by political figures are also discussed to determine how effective responses were in improving the economy. The source also contains the effects the Great Depression in America had on other countries.

Source 4

This source focuses on America from 1921-1933. New industries developed and these industries are identified as factors which contributed to the prosperous state America was in in the 1920s. The weaknesses in the American economy are also discussed such as goods being easily available on credit which resulted debts not being paid, as well as the discrimination against foreigners which caused tensions between people in America and resulted in demonstrations. There were also debts owed to America by its allies and by Germany as reparations for World War 1. The change from a prosperous economy to a collapsing one is seen in the 1920s by factors such as the collapsing farming industry where surplus food was made and not sold. There were also various bank failures in the 1920s. High tariffs and reduced taxation are identified as factors that stopped America from bringing more money into the economy. The stock market in America was first viewed as a benefit to the economy because it brought wealth to many individuals, but the stock market is later viewed as a weakness of the economy because stocks were eventually sold for higher that their worth. The Stock Market Crash and its impact on the American economy are analysed. Responses to uplift the economy are also mentioned.

Evaluation of Sources

The Great Depression is a book in the Wayland Documentary History Series. It was published in Hove, England and printed in Avon, England in 1973. This source aims to inform readers about “the Roaring Twenties” in America during the early 1920s, leading up to the causes and impact of the Great Depression in America. The source also informs readers about the impact the Great Depression in America had on countries such as Germany and Britain. The source is useful because it discusses the Wall Street Crash and the Great Depression. The source is objective and correlates with other sources which increases its reliability. There are no obvious limitations to the source.

This textbook was published by in Cape Town in 2012 by Oxford University Press Southern Africa Ltd. The purpose of this source is to inform Grade 11 learners about the underlying problems that caused the Great Depression in 1929, as well as the effect the Great Depression had on the American economy. The information in this source is accurate because it correlates with other sources and this increases the reliability of the source. The source is objective and has three authors which increase the reliability. The source is useful because it discusses the causes and impact of the Great Depression and Wall Street Crash. There are no obvious limitations to the source.

Analysis

The aim of this research task is to establish to what extent the Wall Street Crash caused the Great Depression in America in the 1930s. Other than the Wall Street Crash, there were economic, social and political problems in America that played a role in causing the Great Depression such as an unequal distribution of wealth, agricultural problems, unemployment, US tariffs and loans owed to the US.

The uneven distribution of wealth eventually resulted in unemployment and was a contributing factor to the collapse of the US economy known as the Great Depression. Groups such as African Americans, Native Americans and workers did not experience the same benefits of the economic boom in the early 1920s as other Americans such as the high or middle-class Americans. Many workers were exploited resulting in low wages and poor lifestyle. Many African Americans and Native Americans were discriminated against and had a poor standard of living. Many individuals in these groups lived in poverty and this meant they were too poor to buy the goods produced. The demand of goods reduced because people did not have the money to buy these goods, and the decrease in demands resulted in factories producing fewer goods. The reduction of goods produced in factories meant that not as many workers were needed in the factories therefore people lost their jobs.

However, the Stock Market Crash contributed to the Great Depression because it increased unemployment and caused many individuals to lose their savings in ban. Share prices rose steadily in the 1920s but shares were eventually being sold for more than their value. Investors began selling shares to get their money and this resulted in an excess of shares being offered when demand for the shares decreased. The decreasing demand for shares immensely decreased the value of shares. Shares no longer had value and people then stopped investing their money in shares. Those who still had shares were unable to repay loans to banks because they lost their money investing in worthless shares, resulting in bank failures and a further loss of money for individuals who kept their life savings in the collapsing banks. People could no longer afford goods because banks lost their life-savings. The Stock Market Crash resulted in the decrease of demand for goods because people could no longer afford them. Production in factories had to decrease because less people could afford goods produced; resulting in many workers lost their jobs.

Furthermore, standards of living dropped because people became unemployed and could no longer afford basic necessities. (Bottaro et al., 2012). Unemployed people could no longer pay their rents and had to be evicted. Many people became homeless and travelled from place to place looking for jobs.

Agricultural problems eventually resulted in the unemployment of many, and this contributed to the economic recession because people were no longer earning money to live off. (Bottaro et al., 2012). The farming industry in America was booming during World War 1 because food was in high demand from Europe. American farmers produced a lot of food because of high demands and this high demand brought in much profit for them during the War, but the end of War resulted in a decrease of food demand. The decrease in demand resulted in a surplus of food grown by American farmers, resulting in farmers decreasing the price of their produce in order to sell their excess produce and make some money. Farmers had surplus food and were earning less income for it. The reduction of income for farmers led to farm workers losing jobs because farmers could no longer afford to employ these people.

Furthermore, new methods using by growing industries in the 1920s increased unemployment. (Walsh, 2001). Mass production was used in many industries and fewer workers were needed to produce goods. People became unemployed due to a reduction in the demand for labour and those who were unemployed did not earn enough money to live off of or buy necessities. The lack of sales resulted in the demand for goods decreasing and business profits decreased. New industries developed in American used a form of production that negatively affected the economy by increasing unemployment.

In addition, the failure of European countries to repay loans granted to them by private American companies resulted in great money loss for America these companies. American companies granted loans to Europe during the War and these loans were used to help European military and buy war supplies. After WW1 the loans were used by Europe to strengthen their damaged economy as a result of the War. Millions of dollars were lost by the American Companies because many loans were not repaid. War debts contributed to the Great Depression when European countries did not pay back loans and fortunes from American companies were lost. Unpaid loans contributed to the Great Depression because it resulted in less money being brought into the US economy, limiting development in the economy.

However, the Stock Market Crash resulted in businesses struggling to keep their business afloat. Banks collapsed when the stock market crashed and businesses no longer trusted their money with banks. Bank failures also meant that businesses could not get loans needed for expansion and to maintain business operations, resulting in businesses retrenching workers or reducing employees’ wages to keep afloat. The Stock Market Crash led to bank failures which prevented businesses from contributing to the economy because businesses lacked funding to continue or improve their operations and make a profit. The Stock Market Crash also resulted in poor standard of living for those who lost their jobs or earned less money because they had to be fired or their wages had to be reduced in order for businesses to keep afloat.

Furthermore, “millions of wage earners or poorly paid professional workers had invested all or a large part of their accumulated funds in carrying stocks on margin”. This meant that workers were not only affected by wage reductions or being retrenched due to the Stock Market Crash, but those workers also lost their savings due to the Crash of Octobe.

US tariffs contributed to the economic instability in America by indirectly increasing agricultural problems. America’s policy of protective tariffs made imports expensive to protect local business from foreign competition thereby giving local businesses an opportunity to gain profits. US tariffs limited goods being imported therefore European countries did not export many goods to the US. The decreasing exported goods resulted in less money being made by European countries, therefore European countries could not use its funds to purchase America’s surplus food when the sale of the surplus food was essential to reduce America’s agricultural problem.

The Stock Market Crash in America in 1929 was to a lesser extent the cause of the Great Depression. The stock market crash resulted in bank failures, business failures, worsened agricultural problems and unemployment. However, there were many other factors that caused the Great Depression. An unequal distribution of wealth, agricultural problems and unemployment were on-going problem in the US economy prior the Stock Market Crash in October 1929 and these problems were contributing factors of Great Depression in America in the 1930s. US tariffs and loans not being paid back were also contributing factors of the Great Depression.

Reflection

I chose the Great Depression as the topic for my investigation because I had never gone into much detail about it when learning the syllabus. I enjoy learning about American history and wanted to gain more knowledge about the Great Depression in America. This investigation allowed me to learn more about the causes of the Great Depression and adopt a new view about the Stock Market Crash, now seeing the crash as both a symptom and a cause of the economic problems in America.

This investigation helped me develop my time management skills and practise analysing sources. Information about the Great Depression was not difficult to get because there was information available on the Great Depression in school textbooks and libraries.

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